According to the Bureau of Labor Statistics, wages rose by $.04 to $27.70/hour in April, home price appreciation, though slowing, rose by 3.7% according to CoreLogic and construction jobs rose by 239,000 compared with 2018, according to the National Association of REALTORS® (NAR) Construction and Housing Starts Outlook 2019-2028.
What do all of these statistics mean?
First and foremost, home price appreciation continues to outpace wage growth. Affordability is the bottom line issue affecting people on all economic levels. Moody’s Investors Service tell us that people making $100,000/year can afford only 10.6% of the homes for sale in San Jose; and Trulia data tells us that teachers, first responders and restaurant workers are still struggling to afford to live in the communities they serve.
In fact, according to Trulia, the list price for a for-sale home nationwide has increased +19.2% in the last three years while wages have increased +6.7% during this same time period. A recent story by National Public Radio told us that restaurants in San Francisco, one of the major foodie cities in the US, are having to close because their workers cannot afford to live anywhere close (not even in cities requiring one way commute times of 90 minutes) to the restaurants in which they work.
In San Francisco, according to Trulia, restaurant workers can afford only 17.6% of houses available for sale and in Los Angeles, they can afford 25.1% of the homes for sale. In Pittsburg, one of the country’s least expensive housing markets, restaurant workers can afford only 24.4% of houses available for sale.
The largest increases in construction jobs are occurring in California, Washington, Nevada, Arizona, Texas, New York, Georgia, Florida and Virginia. However, residential construction continues to sit below pre-recession levels while non-residential construction is slightly above. (Think e-commerce expansion and increased demand for warehouse and distribution centers.)
NAR predicts housing starts to pick up from 1.36M in 2018 to 2.0M by 2028. However, these projections are well below the shortage of approximately 600,000 units needed based upon household formation and replacements for obsolete/demolished housing.
With demand likely to outpace supply, NAR believes there will be increased demand for housing that requires less construction labor, such as panelized and modular construction and manufactured housing.